The Future
As of today, Uber is firmly top of funnel for many urbanites looking to get from A to B conveniently and cost effectively. This places them, arguably alongside Google (Maps), in a valuable position in the smartphone-first urban transportation value chain.
Growth — Uber’s strategic growth prospects can be summarised as such;
leverage platform size x (doubling down on existing markets + new products)
This translates to; increasing rideshare penetration in existing markets, expanding light electric vehicles in new markets, expanding multi-modal capacities, continuing to expand Eats and Freight and investing in autonomous vehicles. Let’s dig into how:
Multi-Modal — In a post-Dara world, Uber has been active in placing itself as not only a transport network operator but also an aggregator of third-party transportation services. Strategically, this makes sense; exerting the power of its user base, extracting a platform tax whilst not dealing with the complexity of operating a transportation network makes sense.
“We plan to introduce multi-modal trips, a combination of our Ridesharing products, our New Mobility products, or public transportation, to create an optimal route for a consumer that can be more affordable than routes that do not incorporate public transportation.”(Uber S1)
If Uber can continue to add both public and private transportation networks to their platform, this will be a powerful consumer proposition. Whilst, going multi-modal seemingly isn’t optimising for short-term topline growth, Uber clearly understand the power of their platform and the value in being a significant player in large adjacent transportation markets.
Multi-modality makes sense for a number of reasons, though may also allow Uber to generate significant data around city-level transportation — the effective bundling of these services will allow Uber to down into monthly subscription packages, such as the newly launched RidePass. This potentially provides the company with more valuable, predictable recurring revenue and consumers, with all you can eat transportation.
Light-electric vehicles — 2018 was the year in which Uber really doubled down its effort into light electric vehicles, eBikes and eScooters, in order to target the majority of urban vehicle miles travelled, which is under 3 miles
Uber is in part responding to micromobility insurgents such as VOI, Bird and Lime, and also clearly view this as a short-term threat to core revenues and an attractive mid to long term growth opportunity. Clearly the company has taken the view that if anyone cannibalises these revenues, it should be them who do so. The disruptor highlights how its going to get disrupted;
“We believe that dockless e-bikes and e-scooters address many of these use cases and will replace a portion of these vehicle trips over time, particularly in urban environments that suffer from substantial traffic during peak commuting hours.” (Uber S1)
They’ve expanded this offering through a number of initiatives such as the $200m acquisition of Jump Bikes, the opening of a Chinese office to manage physical inventory supply chain and pushing light electric vehicles through their app to users in relevant geographies. As at year-end 2018, Uber owned and operated eBikes in 12 cities and eScooters in 4 cities.
Autonomous Vehicles — The companies’ historic struggles with unit economics, more specifically at the driver COGS level, led, in part, to forming Uber ATG (autonomous vehicles group) and the $600m acquisition of autonomous trucking company Otto. Today, both unit economics and profitability remain an outstanding question. Whilst the subject of autonomy has been significantly downgraded in importance;
“Along the way to a potential future autonomous vehicle world, we believe that there will be a long period of hybrid autonomy, in which autonomous vehicles will be deployed gradually against specific use cases while drivers continue to serve most consumer demand. As we solve specific autonomous use cases, we will deploy autonomous vehicles against them.” (Uber S1)
As evidenced with Waymo, we’re seeing the most plausible large scale go-to-market for autonomous vehicles to be ridesharing, in ring-fenced geographies. Unfortunately for Uber, the reality of autonomous has been slower than hoped. Uber spent $457m on R&D for ATG in 2018, and currently has partnerships with OEMs such as Toyota, Daimler and Volvo.
Unfortunately for Uber, Lyft has a close partnership with Waymo who have been aggressive in chasing down the opportunity in AVs. Uber’s autonomous program was paused last year by the tragic death of a pedestrian, whilst testing their autonomous vehicles in Tempe, Arizona. Whilst, autonomous remains in the narrative, the company have clearly accepted that’s unlikely to be a short to mid-term driver of growth or margins.
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